You will hear people say it is a buyer's market or a seller's market. However, things are usually not that cut and dry. It could be a seller's market on one side of the city and a buyer's market on the other side.
Market conditions vary by the type of home being sold. For example, a single-family home might be sought after by an investor who wants to use it as a rental property. In the same area, commercial real estate may be difficult to sell. The following are a few factors you can consider when determining if now is the right time to sell.
1. Look at the Inventory
When the market is balanced, which means a market that does not favor the buyer or the seller, there is typically six months of inventory available. You can determine inventory by looking at the number of homes that are for sale and divide that number by the number of homes that have sold in the past 30 days.
For example, if there are 100 homes currently for sale and 25 homes sold in the last 30 days, there is inventory for four months. In this example, the market favors the seller. This is because the inventory would last for less than six months. However, if there were 100 homes currently for sale and only 10 homes sold in the last 30 days, the available inventory would last for 10 months. This would favor the buyer.
2. How Many Homeowners Had to Cut Their Prices?
If homes are selling for their original listing price or for a price that is close to it, then the demand is strong. However, if you see that sellers are lowering their original asking price by a significant amount, the buyer controls the market.
3. How Many Days Are Homes on the Market?
DOM, or days on market, monitors the number of days between when a house is listed and when it is sold. If the market has an average of 60 days DOM but you see that homes are selling in 45 days, this means there is a higher demand for homes in your area. It is a seller's market.
On this point, you need to use a little discernment. Ask why homes are selling fast. Is it because everyone is drastically lowering the price of their home? If that’s the case, the market might favor buyers and not sellers.
4. The Role of Interest Rates
Interest rates affect demand. When mortgage interest rates are low, purchasing a property becomes more affordable for homeowners and investors. However, as interest rates rise, first-time buyers may not have enough money to get into the market. Interest rates can rise when demand for properties increases faster than the properties for sale.
If you are not under pressure to buy or sell a home, it is good for you to do your due diligence and monitor the market. Talk to real estate professionals. They can give you a better feel for market fluctuations in your area.